Key Parts Of Australian Company Law

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Australia is a federal country made up of six states with two mainland territories as well as seven extraterritories and has an estimated population of 25 million. Federal government officials are situated in Canberra, which is the capital city. Canberra However, most (over 70%) of Australians reside in major cities along the coast of Australia’s.

Australian company law offers a variety of opportunities to invest in Australia. We’ve put together 10 key aspects of Australian legal framework that can be of interest for foreign investors. Check out the version that is abridged below for a quick overview of the current state of corporate law in Australia currently.

1. Regulative Scheme

The Corporations Act 2001 regulates companies and their incorporation, acquisition of securities, shares and the derivatives sector.

The Corporations Act, together with other important pieces of legislation create a common corporate regulatory framework that is applicable to all Australian states and territories.

2. Australian Securities and Investments Commission (ASIC)

The Australian Securities and Investments Commission (ASIC) is an Australian federal agency with the responsibility of administering the Corporations Act and has a vast array of powers. It acts as a enforcement and regulator. It is also the primary register and source of information for corporate issues.

ASIC has extensive investigative power in the Australian Securities and Investments Commissions Act to identify violations, gather evidence to initiate criminal proceedings, stop illegal conduct , and even initiate civil proceedings to prosecute offences under the Corporations Act.

3. The incorporation (or “registration”)

A business has its own legal entity from its directors and shareholders. It is able to have its own property, sign contracts, and even commence legal proceedings under their own names. This is the most commonly used type of business organization in Australia.

Companies are formed in accordance with the Corporations Act which involves appointing directors (one of which must be a resident of Australia) as well as issuing shares, naming an office registered in Australia and lodging copies of the constitution of the company with ASIC (although there exists no legal requirement that a business having a constitution in the event that it is not an publicly traded firm or founded for a particular reason).

After being registered with ASIC every company is issued an individual number of nine digits. Australian Company Number (ACN) which is required to be included on the company’s official documents (unless the company is registered with already registered an Australian Business Number (ABN) which is comprised of the company’s ACN and ACN, in which case it may display the ABN in place that of ACN. Foreign companies as well as other entities that must be registered pursuant to the Corporations Act also receive identification numbers referred to under the name of”the” Australia Registered Body Number (ARBN).

4. Different types of companies

The two primary kinds of corporations covered under the Corporations Act are public and proprietary companies that are limited to shares. Both require an official registered office in Australia where communications can be made and for an open company the registered office has to be accessible to all members of the general public. Each company also has to be led by the designation of a “public official” who is accountable to fulfill the duties required by 澳大利亚 公司 法. The director of a company, as well as the public officer of a business as well as the secretary of a publicly traded corporation must reside in Australia (however it is possible that the same person can fulfill the roles of secretary and director simultaneously).

Public Company

A public company is able to sell its stock for subscription or sale to the general public. There is no limit in the exchange of shares. The company must have at minimum three directors, not less than two of them are resident in Australia and also at minimum one shareholder. It is not required for a public corporation for it to have its shares listed with the Australian Stock Exchange (ASX) however it must have the Annual General Meeting (of the shareholders) at minimum once per calendar year and within 5 months after the end of the fiscal year in which the financial report audited of the business along with director’s reports must be made available.

Proprietary Company

Created for a small number of shareholders (not over 50 shareholders who are not employees) the company may impose restrictions on the selling of its shares. It’s the most frequently used type of business in Australia.

It must be owned by at minimum one director and one shareholder (who may comprise the same entity) and must have at minimum one director who lives in Australia.

Proprietary firms are classified as small or large-sized proprietary firms The latter can be considered to be less prone to reporting requirements on financials in the event that it meets at minimum two of the criteria listed below:

The company , as well as the companies it manages should be able to report a consolidated operating gross revenue that is under $25 million during the year of financial reporting;
The amount of its gross assets consolidated and its assets from any entity it manages If any, is lower than $12.5 million at the close of the fiscal year;
The entity and any other companies it owns in any way, had less than 50 employees as of the close of the financial year.

5. Directors and Officers

Control and management of the business are placed with the board of directors and are elected by the shareholders. Directors and others who act as directors, like managers are liable to the company and shareholders certain obligations that result from the general law as well as in particular, the Corporations Act and other legislation. It is crucial to remember that even though a person is not legally appointed director, they could be considered to be one when they perform their duties as if they were a director, or if the board acts generally according to their directives. The obligations that officers and directors are required to fulfill to the Corporations Act are:

To behave with the care and vigilance of a responsible person;
to act with good faith and to serve an appropriate purpose;
To prevent conflicts of interest;
To avoid misuse of position
To ensure that you do not misuse data;
To prevent insolvent trade to avoid insolvency
To disclose or provide certain financial informationto its shareholders.

Infractions to these rules can result in serious consequences, including the possibility of exposing directors to personal or criminal financial responsibility or, in certain instances, both.

6. Recording Requirements for Reporting and records

The scope of reporting obligations is determined by the size and the activities of the company , as well as whether it is an entity that reports. Businesses that conduct business in Australia have a variety of obligations to:

Maintain various records and keep various registers related to their operations
Keep their accounts in line with accounting principles that are generally accepted and that are consistently followed throughout Australia
Make annually financial and annual reports and give copies to shareholders
Make copies of the statements to ASIC and If relevant ASIC and, if applicable, ASIC and, if applicable, the Australian Stock Exchange (ASX)
In certain instances, prepare consolidated financial statements that cover the financial aspects of an entire group of businesses
Request the production of director reports regarding the performance of the business
Certain companies need to they have their accounts regularly audited with an auditor independent of the company who’s resident of Australia
Inform about significant issues that affect their future performance or prospects in writing to ASIC or, when appropriate the ASX.

7. Australian Stock Exchange (ASX)

Public companies are able to obtain funds from the public through placing their shares on ASX this option is also available to overseas companies. The ASX lists the shares of public companies and permits trading in those shares.

Listing is an expensive procedure and businesses must satisfy the stringent financial requirements laid by the ASX Listing Rules, as and also meet all ongoing reporting requirements, as well as additional requirements under the Corporations Act. A thorough prospectus should be sent out to potential investors that describe the company’s position and its future plans.

The company must be able to count an minimum of 300 non-affiliated shareholders that have holdings of the minimum of $2,000 per as well as a free floating of at least 20 percent. The company must also satisfy one or more of the following requirements:

Test of profit ($1 million ) aggregated profit from ongoing operations during the last three years) and $500,000 in consolidated profits from ongoing operations in the past 12 months

or

The test for assets ($4 million in net tangible assets an estimated total market cap of $15million)

8. Crowd-Sourced Financing

Australia has recently passed legislation that permits (eligible) small and start-up business enterprises to raise capital through offering securities to a huge amount of investors without prospectus.

9. Managed Investment Schemes

The managed investment schemes that are regulated by the Corporations Act are defined to comprise any arrangement in which an operator oversees investments that is made by at least one or more passive investors apart from issues of securities or shares within the company.

To be able to register a managed investment scheme, the administrator or the manager has to be an Australian public corporation that holds the Australian financial services license, that permits it to operate the scheme that is registered. There is a substantial expense to set up the registration, registration and operation of a managed investment scheme that is licensed and the constitution of the operator must include sufficient provisions for the matters specified by the Corporations Act and have a compliance plan describing the procedures that have to be implemented to ensure the compliance. There are some exemptions to the rules of scheme for small-scale schemes or those which only have advanced investors, however, the exemptions come with strict restrictions on their application.

10. Acquisition of Businesses

An enterprise can be purchased through two main methods (each of that has its own benefits):

The assets of the company can be purchased (in this case, the business itself is not being acquired) It can also be sold
These are the shares owned by the corporation that controls the business can be purchased.

Rules that are complicated apply to public businesses. For example, take-over laws are in place after a person has purchased 20% of an interest in:

A listed company or
An unlisted business with greater than 50 members.

Additionally the taxation and the impact of stamp duty have to be taken into consideration, and not in all jurisdictions, where Stamp duty (which is a tax imposed by the state) is simply referred to as duty.